Contractors Vs Direct Employees

To hire permanent staff or contract staff …that is the question! Without quoting Hamlet, it is a dilemma that faces most companies, whether to employ staff directly or engage with subcontract workers. Many models in the construction industry suggest that hiring contractors can be easier and faster than direct employees. Nevertheless, at Futurelink we know that every situation must be carefully analysed and assessed before making a decision. The subcontracting option does offer some flexibility and hiring someone directly will require additional effort, costs and commitment.

Pros of using contractors

The benefits of using subcontractors are:

  • Can provide the company with additional knowledge and resources
  • Can free up time so that the business can concentrate on what it does best
  • Typically less expensive than hiring a full-time employee (no employer’s NI, holiday pay etc.), thereby lowering overheads
  • A subcontractor usually provides their own equipment/tools
  • Reduces the payroll taxes and benefits being paid
  • Having a service level agreement (contract) in place with the subcontractor provides further warranties on the quality of the work provided and that all relevant insurances are in place.
  • Contracts can be terminated easily
  • Workers can be used as required
  • If using an intermediary/umbrella payroll company, assures the business is not liable for unpaid tax/NI or in breach of IR35 and Onshore Intermediary legislation.

Cons of using contractors

  • Loss of control over the quality and timeliness of work, however, this can be controlled by adding additional staff or management
  • Normally follow their own rules, if not stated differently
  • Performance criteria can be an issue
  • Will prevent the company from developing its own staff
  • Time must be spent analysing and reviewing other company’s work

We have ascertained that having a core of permanent staff provides stability and the chance for individuals to develop their skills and later seek promotion. We hope that you have a clearer insight into contractors vs direct employees.

If your company already engages with subcontract workers/freelancer, whether in the UK or abroad, the Futurelink Group have robust payment solutions to suit your needs, helping you to be as tax-efficient as possible.

Visit our services page to view our range of payroll solutions, or contact us directly at 01923 277900 or to find out how we can help!